Role Of Operations

Research/Management
Science

In

Managerial Decision
Making
 Management Science
Operations Research
Operational Research
Operations Analysis

It is sometimes believed that operations

research refers to constant monitoring of an
organization's ongoing activities such as
production scheduling and inventory control,
facility maintenance and repair, staffing of
service facilities etc.

Whereas many management science studies treat

other kind of decisions that bear on daily operations
only indirectly. These studies usually have planning
orientation. For example determining the breadth of
a firm’s product line, developing a long term plan
for plant expansion, designing a network of
warehouses for a wholesale distribution system,
entering a new business by merger or acquisition.
 
 Some Definitions Of
Operations Research
1. O.R.Deals with systematic and
scientific research on the operations
of a system .(Mccloskey andTrefethen)
 
 
2. O.R. Is the application of scientific
methods, techniques, and tools to
problems involving the operations of a
system so as to provide those in
control of the system with optimum
solution to the problem.
(Churchmann,Ackoff and Arnoff).
 
3. O.R. Is a scientific approach to
problem solving for executive
management. (H.M.Wagner).
 
4. O.R. Is the art of giving bad answers to
problems to which ‘worst’ answer are
sought otherwise. (T.L.Saaty).
 Major O.R.Techniques

1. Linear Programming
2. Transportation Models
3. Assignment Models
4. Other Mathematical Programming
Techniques Like Goal, Integer,
Dynamic Etc
5. Network Techniques Like
PERT/CPM Etc.
6. Queuing Theory
7. Inventory Management
8. Simulation
9. Markov Chains
10. Game Theory
 Characteristics Of O.R.

1. Inter-disciplinary Team Approach

2. Holistic Approach To The System

3. Focus On Decision Making

Phases Of An O.R. Study

1. Identifying The Problem

2. Building A Model

3. Finding The Solution

4. Testing The Model And The

Solution

5. Establishing Control Limits

6. Implementation
 Areas Of Applications Of
Operations Research
(Schumacher-Smith Survey)
Percent Of

Companies Area Of Application

Reporting
Activities

Forecasting 73
Production Scheduling 90
Inventory Control 90
Quality Control 51
Transportation 54
Advertising And Sales Research 27
Maintenance And Repairs 32
Accounting Procedures 17
Plant Location 32
Equipment Replacement 27
Packaging 7
Capital Budgeting 39
Usage Of OR Techniques Among 125 Companies

Frequency Of Use

Tool/Tech Never Moderate Frequent

Statistical Analysis 20 30 75
Computer Simulation 16 57 52
PERT/CPM 22 45 58
Inventory Mgt. Techniques 22 39 64
Linear Programming 30 47 48
Queuing Theory 46 46 33
Non-linear Programming 68 39 18
Dynamic Programming 62 37 26
Game Theory 64 37 24

(No. Of Companies)

Source:- An Unpublished MBA (Part Time )Project, 1999.

 Operations Research Software Available

 
Bernard W.Taylor, Management Science, Prentice-
Hall,Inc., Englewood Cliffs, New Jersey (Contains AB:
QM 4.0 By Sang Lee), 1996.

Hamdy A.Taha, Operations Research : An Introduction,

Prentice-Hall Of India, New Delhi, (Contains Tora And
SimmnetI1),1995.

Sang M.Lee and Jung P.Shim, Micro Management

Science, Allyn and Bacon, (Contains Micro Manager
Version2.0),1990.

Yih-long Chang, Quantitative Systems (QS) Version 3.0,

Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1995.

Yih-long Chang, Quantitative Systems For Business Plus

(QSB+) Version 3.0, Prentice-Hall, Inc., Englewood
Cliffs,NewJersey,1994.

 
Generation
/ Time Description
Frame
Emphasized The Applications Of The Scientific Methods
First/ To Problems Involving Operations Of Systems. OR Teams
1930s- Were Interdisciplinary And Addressed Complex Problems.
1940s

Emphasized Mathematical/Optimization Techniques.

Second / Scientific Methods Still Employed And Computers Began
1950s To Be Integrated Into Tool Box.

Those Who Emphasized Heuristics Programming And Ai-

based Methodology Separated From OR, Thus Creating
Third/ Two Approaches To “Satisficing.” Multiple Objective
1960s Optimization And Goal Programming Reflected The
Change In OR. OR Associated With Quantitative; AI With
Qualitative.

DSS And ES Methodologies Symbolize This Generation.

Fourth/ ES Were Developed By AI In Response To Difficulties It
1970s- Had Encountered; DSS By MS/OR. Decision Maker In
Present Both Cases Becoming More Involved.

There Is Now A Realization That To Solve A Larger Set Of

“Real-World "problems, And So Make A Significant
Impact On Decision Making Technology, One Needs To
Employ A Much Larger Combination Of Techniques And
Fifth/?
Tools, Dependent Upon The Situation. Artificial Barriers
And Constraints Of The Discipline; Should Not Be
Inhibiting.
The Five Generations Of OR
OR’S FORMULATION
APPLIED SCIENTIFIC
METHOD TO PROBLEMS
INVOLVING OPERATIONS
OF COMPLEX SYESTEMS(CS)
FIRST GENERATION ( 1930s-1940s)

EARLY OR
ATTEMPTED TO USE
MATHEMATICAL/
OPTIMIZATION
TECHNIQUES TO SOLVE
PROBLEMS INVOLVING
OPERATIONS OF CS
SECOND GENERATION ( 1950s)

CLASSICAL OR AI

QUANTITATIVE METHODOLOGY QUALITATIVE METHODOLOGY

APPLIED TO SOME SUBSET APPLIED TO LARGE CLASS OF
OF PROBLEMS INVOLVING PROBLEMS(GENERAL PROBLEM
OPERATIONS OF CS SOLVERS-GPS)

THIRD GENERATION ( 1960s)

MS/OR AI/ES
DSS DEVELOPED IN
RESPONSE TO THE LIMITED ES DEVELOPED IN RESPONSE
SUCCESS ACHIEVED BY TO THE LACK OF SUCCESS IN
THE CREATING GPS IN
PREVIOUS GENERATION PREVIOUS GENERATION
FOURTH GENERATION ( 1970s)-PRESENT

SOR
(SYNERGISTICOR)
SYNERGY OF ALL SCHOOLS OF
THOUGHT
QUANTITATIVE QUALITATIVE

CLASSICAL OR AI
MS/OR/DSS AI/ES
FIFTH GENERATION OTHER RELEVANT PARADIGMS
(?)

THE FIVE GENERATIONS OF OR

 Some Definitions Of Linear
Programming

1. A Method To Allocate Limited Resources In

An Optimal Manner So As To Satisfy The
Laws Of Supply And Demand For The Firm’s
Products.

2. A Method To Optimize A Linear Function

Subject To Set Of Linear Constraints.

3. Yet Another Class Of Optimization

Techniques.
 

Janata fertilizers uses nitrates, phosphates,

potash and an inert filler material for fertilizer
manufacture. The firm mixes these four
ingredients to make two basic fertilizers, 5-10-5
and 6-5-10 (nos. represent % wt. Of nitrates,
phosphates and potash in each tonne of
fertilizers). The contribution towards profits
and overheads is Rs.300 and Rs.400 per tonne
for (5-10-5) and (6-5-10) respectively. The firm
has 120 tonnes of nitrates ,200 tonnes of
phosphates, 150 tonnes of potash and unlimited
filler material. They will not receive additional
chemicals until next month. They believe that
they can sell or store at negligible cost all
fertilizer produced during the month.
Determine optimal product mix.
 
A state agricultural federation manufactures
and markets cattle feed. It uses two ingredients
which have the following characteristics

Ing.A Ing.B
Cost/kg. Rs.10 Rs.40
Fiber content 25% 75%
Fat content 20% 10%
 

Specifications are that fiber content should be

at least 50% and fat content should not exceed
18% in every one kg. Of the feed. What
amounts of A and B should be used so that
cost/kg. is minimized?
 PROBLEM-I

5-10-5 6-5-10 Available

NITRATES 5% 6% 120 TONNES

PHOSPHATES 10% 5% 200 TONNES

POTASH 5% 10% 150 TONNES

CONTRIBUTION Rs.300 Rs.400

Per Tonne
 Problem-2

Ing.A Ing.B

Cost/Kg. Rs.10 Rs.40

Fiber 25% 75%

Fat 20% 10%

Required

Fiber Content – At least 50%

Fat Content - Not More Then 18%
 A MEDIA PLANNING PROBLEM

EXPOSURE RATES

TA TB
MAGAZINE 2% 1%
(Rs.80,000)
TV COMMERCIAL 1% 3%
(Rs.3,20,000)
MINIMAL EXPOSURE 50% 30%

A PRODUCT MIX PROBLEM

A COSTS RS.150/- PER PAIR

B COSTS RS.100/- PER PAIR

BUYER WANTS:-

1. EXACTLY 5000 PAIRS

2. NOT MORE THAN 2000 PAIRS OF A
3. FOR EVERY ONE PAIR OF A NOT MORE
THAN TWO PAIRS OF B
OBJECTIVE: MINIMIZE THE COSTS
 A Product Mix Problem

Cont/Pair Rs 150 Rs.100

HIKING BOOTS SKING BOOTS AVAILABLE

SEWING 2 3 13 HOURS
STRETCHING 5 2 16 HOURS

SOLUTION :- HB-2, SB-3

TC = Rs 600.

Another Product Mix Problem

Cont/Pair Rs.100 Rs.150

A( moccasin) B (derby)
Cutting & 100 Or 150
Upper Closing
Lasting 50 Or 200
Sole Adhesion 250 Or 125

Solution :- A - 21.42857
B - 114.2857
TC – Rs 19285.71
PRODUCTS MATERIALS CONT/UNIT
A B C

P1 1 2 3 Rs.3
P2 2 1 1 Rs.4
P3 3 2 1 Rs.5
AVAILABLE 10 12 15

PRIMAL PROBLEM
MAX Z = 3X1+4X2+5X3
X1+2X2+3X3< 10
2X1+X2+2X3< 12
3X1+X2+X3< 15
X1, X2, X3 > 0

SV CONT Q 3 4 5 0 0 0
COEFF. X1 X2 X3 S1 S2 S3
S2 0 1 0 0 4/5 -1/5 1 -3/5
X1 3 4 1 0 -1/5 -1/5 0 2/5
X2 4 3 0 1 8/5 3/5 0 -1/5
OC -4/5 -9/5 -2/5
DUAL PROBLEM
Mm Z* = 10Y1+12Y2+15Y3
Y1+2Y2+3Y3 > 3
2Y1+Y2+Y3 > 4
3Y1+2Y2+Y3 > 5
Y1, Y2,Y3 > 0
SV COST Q 10 12 15 0 0 0
COEFF. Y1 Y2 Y3 S1 S2 S3

Y3 15 2/5 0 3/5 1 -2/5 1/5 0

S3 0 4/5 0 -4/5 0 1/5 -8/5 1
Y1 10 9/5 1 1/5 0 1/5 -3/5 0

OC 1 4 3
 Applications Of Linear Programming In
Production Management

1. Product Mix
2 Production Smoothing
3. Assembly Line Balancing
4. Sub Contracting
5. Some Purchasing Decisions
6. Location Of Production Facilities

Applications Of Linear Programming In

Marketing Management

1. Media Planning
2. Routing Of Salesmen
3. Physical Distribution
4. Warehousing Decisions
APPLICATIONS OF LINEAR PRORAMMING
IN FINANCIAL MANAGEMENT

1. Capital Budgeting
2. Financing Decisions
3. Portfolio Selection
4. Profit Planning
5. Financial Audit

Applications Of Linear Programming

In Personnel Management
1. Job Assignment
2. Manpower Scheduling
3. Manpower Planning
4. Equitable Salaries
5. Manpower Deployment
Limitations Of Linear Programming

1. Linearity
2. Additivity

3. Continuity
4. Certainty
5. Single Objective
1. A TOOTHPICK MANUFACTURER MAKES TWO KINDS OF
TOOTHPICKS: ROUNDS AND FLATS. MAJOR PRODUCTION
FACILITIES INVOLVED ARE CUTTING AND PACKING. THE
CUTTING DEPARTMENT CAN PROCESS 300 BOXES OF ROUNDS
OR 600 BOXES FLATS PER HOUR. THE PACKING DEPARTMENT
CAN PACKAGE 600 BOXES OF ROUNDS OR 300 BOXES OF
FLATS PER HOUR.

– IF THE CONTRIBUTION OF PROFIT FOR A BOX OF ROUNDS

IS EXACTLY SAME AS THAT FOR A BOX OF FLATS, WHAT IS
THE OPTIMUM PRODUCTION LEVEL?

– UNDER WHAT CIRCUMSTANCES WOULD THE

MANUFACTURER BE BETTER OFF TO PRODUCE ONLY
ROUNDS?

2 A TRUCKING FIRM HAS RECEIVED AN ORDER TO MOVE 3,000

TONNES OF INDUSTRIAL MATERIAL TO A DESTINATION 1,000
KM. AWAY. THE FIRM HAS AVAILABLE AT THE MOMENT A
FLEET OF 150 CLASS A 15 TONNE TRAILER TRUCKS AND
ANOTHER FLEET OF 100 CLASS B 10 TONNE TRAILER TRUCKS.
THE OPERATING COSTS OF THESE TRUCKS ARE RS. 3 AND RS.
4 PER TONNE KM RESPECTIVELY. BASED ON PAST
EXPERIENCE, THE FIRM HAS A POLICY OF RETAINING AT
LEAST ONE CLASS-A TRUCK WITH EVERY TWO CLASS-B
TRUCKS IN RESERVE. IT DESIRES TO KNOW HOW MANY OF
THE TWO CLASSES OF VEHICLES SHOULD BE DISPATCHED
TO MOVE THE MATERIALS AT MINIMAL OPERATING COSTS.

 
3. A FARMER HAS A 100- HECTARE FARM. HE CAN
SELL ALL THE TOMATOES, LETTUCE, OR
RADISHES HE CAN RAISE. THE PRICE HE CAN
OBTAIN IS RE.1 PER KILOGRAM FOR TOMATOES,
RE. 0.75 A HEAD FOR LETTUCE AND RS. 2 PER
KILOGRAM FOR RADISHES. THE AVERAGE YIELD
PER HECTARE IS 2,000 KILOGRAM OF TOMATOES,
3000 HEADS OF LETTUCE AND 1,000 KILOGRAMS OF
RADISHES. FERTILIZER IS AVAILABLE AT RE. 0.50
PER KILOGRAM AND THE AMOUNT REQUIRED PER
HECTARE IS 100 KILOGRAMS EACH FOR
TOMATOES AND LETTUCE AND 50 KILOGRAMS
FOR RADISHES. LABOUR REQUIRED FOR SOWING,
CULTIVATING AND HARVESTING PER HECTARE IS
5 MAN-DAYS EACH FOR TOMATOES AND RADISHES
AND 6 MAN-DAYS FOR LETTUCE. A TOTAL OF 400
MAN-DAYS OF LABOUR ARE AVAILABLE AT RS.20
PER MAN-DAY. FORMULATE THIS PROBLEM AS A
LINEAR PROGRAMMING MODEL TO MAXIMIZE
THE FARMER’S TOTAL PROFIT.
4. FOUR PRDUCTS HAVE TO BE PROCESSED THROUGH
THE PLANT, THE QUANTITIES REQUIRED FOR THE
NEXT PRODUCTION PERIOD BEING:
PRODUCT 1 2,000 UNITS
PRODUCT 2 3,000 UNITS
PRODUCT 3 3,000 UNITS
PRODUCT 4 6,000 UNITS

THERE ARE THREE PRODUCTION LINES ON WHICH

THE PRODUCTS COULD BE PROCESSED. THE RATES
FOR PRODUCTION IN UNITS PER DAY AND THE TOTAL
AVAILABLE CAPACITY IN DAYS ARE GIVEN IN THE
FOLLOWING TABLE. THE COST OF USING THE LINES IS
RS. 600, RS. 500, RS. 400 PER DAY,RESPECTIVELY,

ASSIGNMENT OF FOUR PRODUCTS: RATES OF

PRODUCTION IN UNITS PER DAY.

PRODUCTION PRODUCT MAX.LINE

LINE 1 2 3 4 CAPACITY(DAYS)

A 150 100 500 400 20

B 200 100 760 400 20
C 160 80 890 600 18

FORMULATE THE ABOVE AS A LINEAR PROGRAMMING

PROBLEM TO MINIMIZE THE COST OF PRODUCTION.
5. PRQ FEED COMPANY MARKETS TWO FEED MIXES
FOR CATTLE. THE FIRST MIX, FERTILEX, REQUIRES
AT LEAST TWICE AS MUCH WHEAT AS BARLEY. THE
SECOND MIX, MULTIPLEX REQUIRES AT LEAST
TWICE AS MUCH BARELY AS WHEAT. WHEAT COSTS
RS.1.50 PER KG. AND ONLY 1,000 KG. ARE AVAILABLE
THIS MONTH. BARLEY COSTS RS. 1.25 PER KG. AND
1200 KG. ARE AVAILABLE. FERTILEX SELLS FOR
RS.1.80 PER KG. UPTO 99 KG, AND EACH ADDITIONAL
KG. OVER 99 KG. SELLS FOR RS.1.65. MULTIPLEX
SELLS AT RS. 1.70 PER KG. UPTO 99 KG. AND EACH
ADDITIONAL KG.OVER 99 KG. SELLS FOR RS.1.55.
BHARAT FARMS WILL BUY ANY AND ALL AMOUNTS
OF BOTH MIXES PQR FEED COMPANY WILL MIX. SET
UP THE LINEAR PROGRAMMING PROBLEM TO
DETERMINE THE PRODUCE MIX THAT RESULTS IN
MAXIMUM PROFITS.
A MANUFACTURER HAS CONTRACTED TO PRODUCE 2,000 UNITS
OF A PARTICULER PRODUCT OVER THE NEXT EIGHT MONTHS.
DELIVERIES ARE SCHEDULED AS FOLLOW:
JANUARY 100
FEBRUARY 200
MARCH 300
APRIL 400
MAY 100
JUNE 100
JULY 500
AUGUST 300

TOTAL 2,000

THE MANUFACTURER HAS ESTIMATED THAT IT COSTS HIM RE.

1 TO STORE ONE UNIT OF PRODUCT FOR ONE MONTH. HE HAS A
WAREHOUSE CAPACITY OF 300 UNITS.
THE MANUFACTURER CAN PRODUCE ANY NUMBER OF UNITS IN
A GIVEN MONTH, SINCE THE UNIT CAN BE PRODUCED MOSTLY
WITH PART-TIME LABOUR, WHICH CAN BE EASILY OBTAINED.
HOWEVER,THERE ARE THE COST OF TRANING NEW PERSONNEL
AND COSTS ASSOCIATED WITH LAYING OFF PERSONNEL WHO
HAVE BEEN HIRED. THE MANUFACTURER HAS ESTIMATED
THAT IT COSTS APPOXIMATELY 75 PAISE PER UNIT TO INCRESE
THE PRODUCTION LEVEL FROM ONE MONTH TO THE NEXT(E.G.
IF PRODUCTION IN JANUARY IS 200 AND IS INCREASED TO 300 IN
FEBRUARY, THE COST IS RS.75 FOR TRANING THE ADDITIONAL
PEOPLE REQUIRED TO PRODUCE AT THE 300 UNIT
LEVEL.)SIMILARLY IT COSTS 50 PAISE PER UNIT TO REDUCE
PRODUCTION FROM ONE MONTH TO THE NEXT. (AT THE END OF
EIGHT MONTHS, ALL EMPLOYEE WILL BE LAID OFF WITH THE
CORRESPONDING PRODUCTION-REDUCTION COSTS). ASSUME
THE PRODUCTION LEVEL BEFORE JANUARY IS ZERO .
FORMULATE THE ABOVE AS A LINEAR PROGRAMMING
PROBLEM.
 Transportation Models
• There are a number of availability
centres such as factories, warehouses etc.
With known availabilities.
• There are a number of consumption
centres such as warehouses, markets etc.
With known requirements.
• The distribution cost (freight, handling
costs etc.) Per unit from an availability
centre to a consumption centre is given
• The problem is to find an optimal
distribution plan i.e. how many units
should be allocated from which availability
.
centre to which consumption centre so that
the total distribution cost is minimized
• Single commodity
• Direct shipment
 The Assignment Model

• The assignment model is a special type of

linear programming problem in which ‘n’
items are assigned among ‘n’ receivers, one
item to a receiver,such that the total return
resulting from the assignment is optimized.
 
• The returns associated with each assignment
are assumed to be known and independent of
each other.

• Ex-1 A marketing manager may have four

salesmen and four sales territories. Which
assignment will help in maximizing sales?

• Ex-2 A foreman may have five mechanics and

five jobs, how the assignment should be made
so as to minimize the total time taken for
completing the jobs.
 
 A TRANSPORTATION PROBLEM
WAREHOUSES

TO/
FROM D E F G CAPACITY
A 42 48 38 37 160
160
B 40 49 52 51 150
FACTORIES 80 10 60
C 39 38 40 43 190
80 110
REQD. 80 90 110 220 500/500

AN ASSIGNMENT PROBLEM
WORKERS
I II III IV

A 16 14 15 18
JOBS B 12 13 16 14
C 14 13 11 12
D 16 18 15 17

A ROUTING PROBLEM
TO CITY
A B C D E
A - 4 7 3 4
FROM B 4 - 3 4
6
CITY C 7 6 - 7 5
D 3 3 7 - 7
E 4 4 5 7 -
 For Maximization Case
• The numerical value of a given objective
function with respect to the integer solution
can never exceed the numerical value of
that objective function with respect to the
non-integer solution.
 

For Minimization Case

• The numerical value of a given objective

function with respect to the integer solution
can never be less than the numerical value of
that objective function with respect to the
non-integer solution.
 The cutting division of the photo film
corporation requisitions from stock control
department plastic films of 85 feet (fixed unit
length) which can be cut according to two
patterns. First pattern will cut each film length
into 35 feet pieces with the remaining 15 feet to
scrap. Second pattern will cut each film length
into a 35 feet piece and two 25 feet pieces with
nothing to scrap. The present order from a
customer is for 8 pieces of 35 feet length and 6
pieces of 25 feet length. What minimum number
of plastic films of 85 feet should be cut to meet
customer requirement? 
 Problems On Integer Linear Programming

1. The ABC company requires an output

of at least 200 unit of a product per day
and to accomplish this target it can buy
machine A or B or both. Machine A costs
Rs.20,000 while machine B costs Rs.15,000
and company has a budget of Rs.2,00,000
for the same. Machines A and B will
produce 24 and 20 units respectively of this
product per day. However, machine A will
require a floor space of 12 square feet while
machine B will require 18 square feet and
company has total floor space of 180 square
feet only. Determine the minimum number
of machines that should be purchased.
 
2. ABC COMPANY HAS 4 INDEPENDENT
INVESTMENT PROJECTS AND MUST ALLOCATE A
FIXED CAPITAL TO ONE OR MORE OF THEM SO
THAT THE COMPANY’S NET PRESENT VALUE IS
MAXIMIZED. THE ESTIMATED NET PRESENT VALUE
AND THE ANTICIPATED CASH OUTFLOWS
ASSOCIATED WITH THESE PROJECTS IS GIVEN IN
THE FOLLOWING TABLE:

 
NPV CASH OUTFLOWS(RS.1000)
PR. NO (RS. 1000) YEAR(I) YEAR(II)

1 100 50 150
2 50 105 30
3 140 318 143
4 90 100 68

IN SELECTING THESE PROJECTS, THE COMPANY IS

CONSTRAINED TO LIMIT ITS EXPENDITURE IN THE FIRST
YEAR TO RS.5, 15,000 AND IN THE SECOND YEAR TO RS.
6,38,000.
IF PROJECTS 1 AND 3 ARE MCTUALLY EXCLUSIVE,
HOW SHOULD THE INVESTMENT BE MADE SO THAT THE
TOTAL NET PRESENT VALUE IS MAXIMIZED?
 SET-UP COST PER MAX.
MACHINE COST(Rs) UNIT (Rs) PRODUCTION

1 8000 5 4000
2 5000 4 3000
3 4000 8 1000

QUANTITY REQUIRED:5000 UNITS AT MINIMUM COST.

PRODUCT

PLANT P Q R CAPACITY

A 35 24 20 600
B 30 28 25 1,000
C 20 25 37 800
D 24 32 28 800

DEMAND 500 800 600

BASIC CONCEPTS OF GOAL PROGRAMMING

1. GOALS HAVE PREEMPTIVE PRIORITIES.

2. MINIMIZE DEVIATIONS FROM GOALS.

3. ATTACH WEIGHTS TO DIFFERENT

ACTIVITIES AT THE SAME GOAL LEVEL.
UPHOLSTERY MATERIAL AND A REGULAR DRESS
MATERIAL. THE UPHOLSTERY IS PRODUCED ACCORDING
TO DIRECT ORDERS FROM FURNITURE
MANUFACTURERS. THE DRESS MATERIAL ON THE OTHER
HAND, IS DISTRIBUTED TO RETAIL FABRIC STORES.
AVERAGE PRODUCTION RATES FOR THE TWO
MATERIALS ARE IDENTICAL; 1000 METRES/HR. BY
RUNNING TWO SHIFTS, NET OPERATIONAL CAPACITY OF
THE PLANT IS 80 HOURS/WK. THE MARKETING
DEPARTMENT REPORTS THAT THE MAXIMUM
ESTIMATED SALES FOR THE FOLLOWING WEEK IS 70,000
M. OF UPHOLSTERY AND 45,000 M. OF DRESS MATERIAL.
ACCORDING TO THE ACCOUNTING DEPARTMENT, THE
APPROXIMATE PROFIT FROM A METRE OF UPHOLSTERY
MATERIAL IS RS.2.50 AND FROM A METRE OF DRESS
MATERIAL IS RS.1.50.
 
THE M.D. OF THE COMPANY BELIVES THAT A GOOD
EMPLOYER- EMPLOYEE RELATIONSHIP IS IMPORTANT IN
BUSINESS. HENCE HE DECIDES THAT A STABLE
EMPLOYMENT LEVEL IS A PRIMARY GOAL FOR THE
FIRM. THEREFORE, WHENEVER THERE IS EXCESS
DEMAND OVER NORMAL PRODUCTION, HE SIMPLY
EXPANDS PRODUCTION CAPACITY BY PROVIDING
OVERTIME. HOWEVER HE FEELS THAT OVERTIME OF
MORE THAN 10 HOURS/WK. SHOULD BE AVOIDED –
BECAUSE OF ACCELERATING COSTS.

CONTD….P/2.
• FIRST GOAL: AVOID UNDER UTILISATION OF
PRODUCTION CAPACITY,
I.E. MAINTAIN STABLE EMPLOYMENT AT NORMAL
CAPACITY
• SECOND GOAL: LIMIT OT OPERATION TO 10 HOURS.
• THIRD GOAL :ACHIEVE SALES GOALS OF 70,000 M. OF
UPHOLSTERY AND 45,000 M. OF DRESS MATERIAL.
• FOURTH GOAL: MINIMISE OT OPERATION AS MUCH
AS POSSIBLE.
• FORMULATE AND SOLVE THIS PROBLEM AS A GOAL
PROGRAMMING PROBLEM.
BHARAT TELEVISION COMPANY PRODUCES CTV SETS.
IT HAS TWO PRODUCTION LINES. PRODUCTION RATE
OF LINE-1 IS 2 SETS/HR. AND IT IS 1.1/2 SETS/ HR. IN
LINE-2. THE REGULAR PRODUCTION CAPACITY IS 40
HR./WK. FOR BOTH LINES. EXPECTED PROFIT FROM AN
AVERAGE CTV SET IS RS.1000/- . THE TOP
MANAGEMENT OF THE FIRM HAS THE FOLLOWING
GOALS FOR THE WEEK (IN ORDINAL RANKING):

GOAL -1: PRODUCTION GOAL –180 SETS.

GOAL –2 : LIMIT OT OF LINE-1 TO 10 HOURS.
GOAL –3 : AVOID UNDERUTILISATION OF
REGULAR WORKING HOURS FOR
BOTH LINES.
GOAL –4 : LIMIT THE SUM OF OT FOR BOTH
LINES. (ASSIGN WTS. ACCORDING TO
RELATIVE COST OF OT HOUR. ASSUME
COST OF OPREATIONS IS IDENTICAL
FOR BOTH PRODUCTION LINES)

FORMULATE THE PROBLEM AS A GLP MODEL. IF

THE TOP MANAGEMENT DESIRES TO PUT A PROFIT
GOAL OF RS.1,90,000 FOR THE WEEK AS THE TOP
PRIORITY GOAL ABOVE THE STATED FOUR GOALS,
HOW WOULD THE MODEL CHANGE.
 APPLICATION AREAS OF GOAL PROGRAMMING

GOAL PROGRAMMING HAS BEEN WIDELY APPLIED TO

VARIOUS DECISION PROBLEMS IN BUSINESS FIRMS,
GOVERNMENT AGENCIES, AND NON PROFIT INSTITUTIONS.
SOME OF THE BEST KNOWN APPLICATIONS OF GOAL
PROGRAMMING INCLUDE THE FOLLOWING PROBLEM
AREAS:
  • ACADEMIC PLANNING AND • FACILITIES LOCATION AND
ADMINISTRATION LAYOUT PLANNING
• ACCOUNTING ANALYSIS • FINANCIAL PLANING
• ADVERTISING MEDIA • HEALTH-CARE DELIVERY
SCHEDULING SYESTEM DESIGN
• BLOOD COLLECTION AND • INVENTORY MANAGEMENT
DISTRIBUTION • LOCATION AND
• CAPITAL BUDGETING ALLOCATION DECISIONS
• COMPUTER RESOURCE • MANPOWER PLANNING
PLANNING AND • MARKETING LOGISTICS
ALLOCATION • MILITARY STRATEGIES AND
• DECISION-SUPPORT PLANNING
SYSTEM DESIGN • NETWORK SCHEDULING
• ECONOMIC POLICY • ORGANIZATIONAL
ANALYSIS
ANALYSIS
• EDUCATIONAL SYSTEM • PERSONNEL
PLANNING ADMINISTRATION
• ENVIRONMENTAL • POLICY ANALYSIS
PROTECTION
• RESEARCH AND
• PORTFOLIO DEVELOPMENT
DETERMINATION
• TRANSPORTATION
• PRODUCTION SCHEDULING LOGISTICS
• PROJECT SCHEDULING • URBAN PLANNING
• QUALITY CONTROL • WATER RESOURCES
PLANNING
 THE AIR FREIGHT PER TONNE (IN 100 RS.)
BETWEEN SEVEN LOCATIONS IS GIVEN IN THE
FOLLOWING TABLE. WHERE NO DIRECT AIR FREIGHT
SERVICE IS AVAILABLE, A VERY HIGH COST M HAS BEEN
USED.
A CERTAIN CORPORATION MUST SHIP A CERTAIN
PERISHABLE COMMODITY FROM LOCATIONS 1, 2, 3, TO
LOCATIONS 4, 5, 6 &7. A

LOCATION 1 2 3 4 5 6 7
 

1 - 12 27 14 45 36 15

2 - 10 25 32 M 22

3 - 28 50 28 10

4 - 16 20 32

5 - 26 35

6 - 20

7 -
.
TOTAL OF 30, 50 & 20 TONNES OF THIS COMMODITY ARE
TO BE SENT FROM LOCATIONS 1, 2 & 3 RESPECTIVELY. A
TOTAL OF 15, 30 25 & 30 TONNES ARE TO BE SENT TO
LOCATIONS 4, 5, 6 & 7 RESPECTIVELY. SHIPMENTS CAN BE
SENT THROUGH INTERMEDIATE LOCATIONS AT A COST
EQUAL TO THE SUM OF THE COSTS FOR EACH OF THE
LEGS OF THE JOURNEY. THE PROBLEM IS TO DETERMINE
THE OPTIMAL SHIPPING PLAN.
 A PROBLEM ON DYNAMIC PROGRAMMING

A GOVERNMENT SPACE PROJECT IS CONDUCTING

RESEARCH ON A CERTAIN ENGINEERING PROBLEM THAT
MUST BE SOLVED BEFORE MAN CAN FLY TO THE MOON
SAFELY. THREE RESEARCH TEAMS ARE CURRENTLY
TRYING THREE DIFFERENT APPROACHES FOR SOLVING
THIS PROBLEM THE ESTIMATE HAS BEEN MADE THAT
UNDER PRESENT CIRCUMSTANCES, THE PROBABILITY
THAT THE RESPECTIVE TEAMS-CALL THEM A,B AND C –
WILL NOT SUCCEED IS 0.40,0.60 AND 0.80 RESPECTIVELY.
THUS THE CURRENT PROBABILITY THAT ALL THE THREE
TEAMS WILL FAIL IS= 0.192. SINCE THE OBJECTIVE IS TO
MINIMIZE THIS PROBABILITY THE DECISION HAS BEEN
MADE TO ASSIGN TWO MORE TOP SCIENTISTS AMONG THE
THREE TEAMS IN ORDER TO LOWER IT AS MUCH AS
POSSIBLE. THE FOLLOWING TABLES GIVES THE
ESTIMATED PROBABILITIES OF FAILURE WHEN 0, 1 AND
2 .SCIENTISTS ARE ADDED TO THE TEAMS.
TEAM
A B C
NO.OF 0 0.40 0.60 0.80
NEW SCIENTISTS 1 0.20 0.40 0.50
2 0.15 0.20 0.30

HOW SHOULD THE TWO SCIENTISTS BE ALLOCATED TO

THE TEAMS?